Lancaster Colony Reports Second Quarter Sales And Earnings
COLUMBUS, Ohio, Jan. 30 -- Lancaster Colony Corporation today reported net income for the
company's second fiscal quarter ended December 31, 2002 reached $51,979,000
while net sales declined one percent to $308 million versus $312 million in
the second quarter last year.
Second quarter net income included the previously announced pre-tax
distribution of $39.2 million (67 cents per share after taxes) allocated to
the company under the Continued Dumping and Subsidy Offset Act (CDSOA) and
recorded as Other Income. Second quarter results also included pre-tax income
of $2.7 million (five cents per share after taxes) related to the liquidation
of LIFO inventories carried at substantially lower prior years' costs and a
pre-tax charge of $4.9 million (eight cents per share after taxes)
attributable to the previously disclosed restructuring of the company's
consumer glassware operations.
Second quarter net income a year ago was $17,423,000 after a pre-tax
charge of $14.3 million (24 cents per share after taxes) related to the
bankruptcy of Kmart Corporation.
Basic and diluted earnings per share for the second quarter reached $1.43
compared to 47 cents in fiscal 2002. Having adopted Statement of Financial
Accounting Standard No. 142 effective July 1, 2002, the company is no longer
amortizing goodwill, which in the prior year second quarter totaled $660,000
before income taxes (two cents per share after taxes).
Net income for the six months ended December 31, 2002, including the above
items, reached $72,535,000 compared to $37,764,000 earned in the corresponding
period a year ago. Basic and diluted earnings per share were $1.99 compared to
$1.02 for the first six months last year. Goodwill amortization in the first
half last year was $1,320,000 before income taxes (three cents per share after
taxes). Net sales were $583 million versus $577 million for the first six
months a year ago.
John B. Gerlach, Jr., chairman and CEO of Lancaster Colony Corporation,
said, "We were pleased with the relative strength of our consolidated
operations during the quarter. Our Specialty Foods segment results were strong
and our Automotive segment operating margins continued to be encouraging.
However, our Glassware and Candles segment continues to be challenged by the
competitive nature and overall weakness of its markets."
Specialty Foods posted a 20 percent increase in operating income on 10
percent higher sales for the quarter compared to the year-ago quarter when
promotional costs were somewhat higher. Mr. Gerlach said, "Sales growth was
still impressive and led by frozen bread and foodservice product lines. We
also benefited from stable ingredient costs during the quarter."
Glassware and Candles operating income increased $8.6 million on a 21
percent decline in sales, compared with the second quarter last year. The
latest results included the glass operations' restructuring charge and the
LIFO income. The prior year's second quarter results included the Kmart bad
debt charge. Excluding the impact of these specific items, the segment's
second quarter operating income was down approximately 30 percent. Mr. Gerlach
said, "In addition to the prevailing weak retail conditions, operating income
was impacted by competitive pricing issues and lower sales volume as the
corresponding lower production levels resulted in less fixed cost absorption.
We are encouraged by the progress being made so far to restructure our glass
operations, and the initial rollout of an exciting new candle program during
the second half of the fiscal year."
The company's Automotive segment operating income increased approximately
30 percent on a six percent boost in sales compared to the second quarter last
year. Mr. Gerlach said, "This sales increase coupled with continued cost
reduction efforts helped operating income as a percentage of sales rise to 7.4
percent compared to 6.0 percent a year ago."
Looking forward, Mr. Gerlach stated, "Challenges to be addressed over the
balance of the fiscal year include uncertain market conditions, startup costs
associated with the ongoing consolidation of our consumer glassware operations
and rollout costs related to our new candle program. While we strive to
mitigate where possible the effect of higher materials prices, the impact of
the increased cost of soybean oil at current prices could exceed $2 million in
the second half of fiscal 2003. We remain focused on improving product
offerings and further lowering production costs. Even without the current
year's CDSOA income, we currently believe that last year's level of earnings
per share may be achievable this year."
The company's second quarter conference call is scheduled for this
morning, January 30, at 10:00 a.m. EST. You may access the call through a live
webcast by using the link provided on the company's Internet home page at
http://www.lancastercolony.com. The webcast will be archived and available through
February 13 on the company's website.
This news release contains forward-looking statements related to future
growth and earnings opportunities. Such statements are based upon certain
assumptions and assessments made by management of the company in light of its
experience and perception of historical trends, current conditions, expected
future developments and other factors it believes to be appropriate. Actual
results may differ as a result of factors over which the company has no
control including the strength of the economy, slower than anticipated sales
growth, the extent of operational efficiencies achieved, the success of new
product introductions, price and product competition, and increases in raw
materials costs. Management believes these forward-looking statements to be
reasonable; however, undue reliance should not be placed on such statements,
which are based on current expectations. The company undertakes no obligation
to publicly update such forward-looking statements. More detailed statements
regarding significant events which could affect the company's financial
results are included in the company's Forms 10-K and 10-Q filed with the
Securities and Exchange Commission.
LANCASTER COLONY CORPORATION
CONSOLIDATED SUMMARY OF SALES AND EARNINGS (UNAUDITED)
(In thousands except per-share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2002 2001 2002 2001
Net sales $ 307,669 $ 311,873 $ 583,490 $ 576,802
Cost of sales 233,437 241,520 451,572 447,132
Gross margin 74,232 70,353 131,918 129,670
Selling, general &
administrative
expenses 26,236 42,359 51,122 68,023
Restructuring and
Impairment charge 4,945 -- 4,945 --
Operating income 43,051 27,994 75,851 61,647
Other income (expense):
Interest expense -- -- -- (54)
Interest income
and other - net 40,057 462 40,454 (122)
Income before
income taxes 83,108 28,456 116,305 61,471
Taxes based on income 31,129 11,033 43,770 23,707
Net income $51,979 $17,423 $72,535 $37,764
Net income per
common share:(a)
Basic and diluted $ 1.43 $ .47 $ 1.99 $ 1.02
Cash dividends per
common share $ .20 $ .18 $ .38 $ .35
Weighted average
common shares
outstanding:
Basic 36,354 36,880 36,458 37,031
Diluted 36,406 36,931 36,517 37,081
(a) Based on the weighted average number of shares outstanding during each
period.
LANCASTER COLONY CORPORATION
BUSINESS SEGMENT INFORMATION (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
December 31, December 31,
2002 2001 2002 2001
NET SALES
Specialty Foods $ 164,316 $ 149,728 $ 311,949 $ 285,548
Glassware and
Candles 81,753 103,926 149,963 182,583
Automotive 61,600 58,219 121,578 108,671
$ 307,669 $ 311,873 $ 583,490 $ 576,802
OPERATING INCOME
Specialty Foods $ 34,296 $ 28,606 $ 60,572 $ 56,906
Glassware and
Candles 5,896 (2,687) 9,973 2,709
Automotive 4,541 3,505 8,444 5,005
Corporate expenses (1,682) (1,430) (3,138) (2,973)
$ 43,051 $ 27,994 $ 75,851 $ 61,647
LANCASTER COLONY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
2002 2002
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 128,505 $ 83,378
Receivables -- net of allowance for
doubtful accounts 137,584 109,350
Total inventories 147,862 148,251
Prepaid expenses and other current assets 27,559 25,121
Total current assets 441,510 366,100
Net property, plant and equipment 159,278 165,943
Other assets 88,595 86,662
Total assets $ 689,383 $ 618,705
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,208 $ 43,258
Accrued liabilities 75,768 46,046
Total current liabilities 116,976 89,304
Other noncurrent liabilities and deferred
taxes 28,585 28,124
Shareholders' equity 543,822 501,277
Total liabilities and shareholders'
equity $ 689,383 $ 618,705
SUBJECT TO YEAR-END AUDIT